Request for Waiver of Amount Representing Surcharges and Penalty for Late Payment of CWT and DST

March 12, 2001 BIR RULING NO. 011-01 204, 248 & 249; 000-00 Penta Pacific Realty 20/F, Pacific Star Building Makati Ave. corner Sen. Gil Puyat Ave. Makati City Attention: Mr . Dennis B . Aragon Vice President Gentlemen : This refers to your letter dated June 15, 2000 requesting for waiver of the charges for late payment of creditable withholding tax (CWT) and documentary stamp tax (DST) amounting to P2,063,638.82 and P636,590.82, respectively, and for the immediate issuance of the certificate authorizing registration (CAR). It is represented and documents show that Pinta Realty (Pinta) was indebted to PCIBank for P544,238,111.24; that Pinta paid the said indebtedness by a realty property through "dacion en pago" with a zonal value of P693,282,320.00 (condominium unit at Pacific Star Building, Makati City); that as computed, the CWT and DST thereon amounted to P34,664,116.00 and P10,399,245.00, respectively; that on February 29, 2000 you wrote a letter to then Regional Director Antonio I. Ortega of Makati City requesting for the reduction of the existing zonal values for your property covered by the dacion en pago; that pending receipt of an answer to your request, you paid on March 7, 2000 the CWT and DST in the respective amounts of P27,211,906.00 and P8,163,585.00 based on the dacion amount of P544,238,111.24; that on May 23, 2000, you received a fax copy of the Commissioner's letter dated April 18, 2000 to Director Ortega to the effect that the CWT and DST shall be based on the prevailing zonal value and that the CAR shall be issued only after full payment of the applicable taxes; that the next day, May 24, 2000 you paid the additional CWT and DST in the respective amounts of P7,452,210.00 and P2,235,660.00; that all in all, you have paid in full the assessed CWT and DST based on the zonal value of the property in the aforesaid amounts of P34,664,116.00 and P10,399,245.00 as follows: CWT paid on 3-07-2000 - P27,211,906.00 CWT paid on 5-24-2000 - P 7,452,210.00 Total - P34,664,116.00 ============ DST paid on 3-07-2000 - P 8,163,585.00 DST paid on 5-24-2000 - P 2,235,660.00 Total - P10,399,245.00 ============ and that on June 5, 2000, the Revenue District Officer of Revenue District No. 48, North Makati, required you to pay the corresponding 25% surcharge, interest and compromise penalty in the total amount of P2,700,229.64 for late payment of CWT and DST. In reply, please be informed that Sections 5.4 and 5.5 of Revenue Regulations No. 12-99 implementing Section 248 of the Tax Code of 1997 provide that no surcharge is imposed on deficiency tax and on the basic tax unless the amount due inclusive of penalties is not paid within the time prescribed in the notice and demand. It appears that the dacion took place on march 7, 2000, hence, the CWT and the DST were due not later than April 10, 2000. From the foregoing facts, it is clear that there was no intention on your part not to pay the tax due the aforesaid dacion transaction. Your failure to pay the correct CWT and DST was due to your request for the reduction of the existing zonal values of subject property covered by the dacion because of the adverse effect of the Asian currency crisis on the real property sector, which request was favorably indorsed by the BIR Regional Director of Makati City in his Memorandum wherein he requested that the taxes be computed on the basis of the dacion price rather than on the prevailing zonal valuation. The fact that you immediately paid the amounts of 7,452,210.00 and P2,235,660.00 representing the CWT and DST on the difference between the dacion value and zonal value shows good faith on your part. Accordingly, in view of the justifiable circumstance surrounding your case, your request for the waiver of the amount representing surcharges and compromise for late payment of CWT and DST is hereby granted pursuant to Section 204(B)(1) of the Tax Code of 1997 which grants to the Commissioner the authority to abate or cancel any portion of the tax liability when the same appears to be EXCESSIVELY ASSESSED. However, the imposition of interest under Section 249 thereof is mandatory, hence, there is still due from you the amount of P233,570.56 as interest covering the period from April 11, 2000 to May 24, 2000 computed as follows: CWT (P7,452,210 x 20% x 44/365) - P179,669.72 DST (P2,235,660 x 20% x 44/365) - P 53,900.84 Total Interest - P233,570.56 ============ You are, therefore, requested to pay the said amount of P233,570.56 within five (5) days from receipt hereof in order that your case may be finally closed and terminated; Otherwise, collection thereof will be enforced through the remedies prescribed by law. Very truly yours, (SGD.) RENE G. BAEZ Commissioner of Internal Revenue